Proposed Congressional Insider Trading Ban

U.S. lawmakers have an unfair advantage over ordinary Americans when it comes to investing. Many can use their insider knowledge of how the laws and spending bills they make will affect businesses and make a killing in the stock market.

They have such a huge advantage that numerous elected politicians earn bigger returns than Wall Street’s professional investment advisers.

That may finally be about to change thanks to the efforts of several U.S. Senators, who struck a deal on legislation that will ban members of the U.S. Congress from trading stocks. Their video announcement was posted on the Nancy Pelosi Stock Trader X account, named after the unlikely investing success of the former Speaker of the U.S. House of Representatives.

A bipartisan group of U.S. Senators, including Josh Hawley (R-MO), Jon Ossoff (D-GA), Jeff Merkley (D-OR), and Gary Peters (D-MI), announced the legislative deal.

Details of the Deal

CNBC’s Rebecca Picciotto reports on the deal, which was reached in early July 2024:

The proposal is the latest chapter in a yearslong saga in Congress to pass regulations that limit lawmakers’ ability to buy and sell stocks, and the first one to get formal consideration by a Senate committee—in this case the Homeland Security & Governmental Affairs Committee on July 24.

Ethics experts say that legislators’ access to the kind of information they receive gives them the potential of having an unfair advantage to the investing public.

Wednesday’s amendment to an existing stock trading ban bill would immediately forbid members of Congress, the president and the vice president from purchasing stocks and other covered investments. It would also give lawmakers 90 days to sell their stocks….

If passed, the bill would also prohibit lawmakers’ spouses and dependent children from trading stocks, beginning March 2027. Also starting that year, the U.S. president, vice president and all members of Congress would have to divest from any covered investments.

A Good Start

The proposed ban on insider trading by officials elected to the U.S. government looks to be a good start. That said, it needs to go much farther.

The legislation should be extended to cover all employees of the U.S. Congress and the federal government’s bureaucrats. It only makes sense since these insiders have access to the same insider information advantage as elected officials.

Additional legislation can provide that reasonable extension. There’s no reason to hold up the bipartisan deal that will finally close the unethical stock trading loopholes that too many elected officials exploit.

Craig Eyermann is a Research Fellow at the Independent Institute.
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